5 reasons to refinance your home loan now

With competition continuing to flare up in the Australian home loan market, homeowners looking to switch over to a better deal are in for a nice surprise. 

The latest edition of our Mozo Banking Roundup has revealed June was another busy month of home loan lenders slashing their fixed and variable rates, with new leaders for both categories emerging just in the last couple of weeks. 

So, with record low interest rates on offer across Australia right now, refinancing could be a great way to give yourself an instant pay raise

And it seems many Aussies are already taking advantage of this opportunity to save big bucks. Australian Bureau of Statistics (ABS) data shows that in April this year, a record $7.9 billion owner-occupier home loans were refinanced, up 50% from last year. 

But of course, every homeowner’s situation differs, so you may be wondering whether refinancing is the right path for you. Here are a few reasons why you might consider this option.

Your fixed rate home loan will revert soon

One common trap that homeowners with fixed rate home loans fall into is that they forget about the revert rate. This is the rate that automatically kicks in once your fixed term ends, and it could go as high as over double the rate you signed up for.

While you might avoid the revert rate by switching over to another loan offered by the same lender, there’s always a chance you may be unhappy with their new offer. 

That’s when refinancing comes in. 

This option allows you to shop around and take your pick from a bigger bunch. Although refinancing involves a bit more paperwork and some fees, it can be an effective way to dodge a nasty hike in monthly repayments, and keep your costs down in the long run. 

You want to be mortgage free sooner

For some homeowners, refinancing is an opportunity to pay off their mortgage faster. By hopping onto a lower rate while maintaining your existing monthly repayments, you can shave years off your loan term. 

The sooner you get out of debt, the less interest you’ll have to pay over the life of the loan.

Let’s say you borrowed $700,000 over 25 years, and you’re currently signed up to the average big 4 variable rate of 3.94%.^ If you were to refinance to the lowest rate in the Mozo database of 2.19% (at the time of writing) but maintain the same monthly repayments of $3,672, then you could potentially be mortgage free 5 years and 5 months earlier and save about $240,431 in total interest. 

Just bear in mind that some lenders may penalise you for paying off your home loan early, so watch out for the early repayment fee when choosing which deal you want to refinance to.

You want a loan with more/less bells and whistles

In the years since you took out your home loan, your circumstances may have changed. Say you started off with a ‘no frills’ option, but a recent job promotion means you now have more disposable income, so you want an option that lets you make extra repayments and access a redraw facility. 

By refinancing to a home loan with more features, you can enjoy a level of flexibility that you didn’t have before. 

However, the more added features a home loan has, the more fees and interest it may charge. So if, on the flipside, you find that you no longer need all the bells and whistles, you could also look to refinance to a more basic loan. 

You want to tap into home equity 

Got a major expense like a home renovation or a medical procedure to cover, but running a little short on cash? For some homeowners, refinancing is a way to access additional funds by way of home equity - that is, the percentage of your property’s market value that belongs to you (not your lender). 

Let’s say your property is worth $700,000 but you still owe the bank $400,000. That means you have equity of $300,000 - or a loan-to-value (LVR) ratio of 57%. So if you refinance to another loan with an 80% maximum LVR, then you’d only need $140,000 (or 20% of $700,000) in home equity to secure the deal. That means your new lender could theoretically release up to $160,000 in leftover equity.  

Just be aware that this method would rewind a lot of your efforts: it would expand the size of your mortgage, so your repayments get bigger and you also add years onto your loan term. So if accessing equity is your reason for refinancing, double check that it’s within your means and you aren’t just magnifying your debt pile. 

You just want better bang for your buck

With current affairs leaving many Aussies worried about their finances, it’s possible we’re all looking for ways to save and grow our emergency cash stash. While fewer online shopping sprees or a smaller energy bill can help to relieve pressure on your budget, the real money makers come from things like your home loan. 

After all, even if your home loan was once the cheapest on the market, that’s likely no longer the case, especially given the steep falls in rates after the five Reserve Bank (RBA) cuts since June last year. 

So to ensure you’re still getting a competitive deal, refinancing to secure a lower rate could be a good option. Chances are, it’ll not only reduce your total interest costs but also slash your monthly repayments by hundreds of dollars. 

So how much can I actually save on monthly repayments by refinancing?

Let’s do the maths.

As of June 2020, the average variable home loan rate for owner occupiers sits at 3.43% p.a., according to Mozo’s home loan statistics. But if you went back to June 2017, you’d be looking at a much higher 4.44% p.a. average. 

That’s a massive 101 basis point difference. This means that just by refinancing to today’s average variable rate rather than sticking with the average rate from three years ago, you could save about $268 in monthly repayments on a $500,000 loan.^^ Over one year, that’s $3,216 extra you get to keep in your hip pocket. 

And that calculation above isn’t even accounting for the range of lenders who have far better rates than the average. Reduce Home Loans, for instance, currently offers the lowest variable rate in our database of just 2.19% (2.19% comparison rate*), available on its Super Saver Variable home loan.

To see how much you could save by refinancing, check out our Home Loans Switch & Save calculator. Or for a list of refinance deals, scroll down below to get started today!

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 473 home loans.
Last updated 19 June 2024 Important disclosures and comparison rate warning*
  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Discount Variable Home Loan

    • Owner Occupier
    • LVR<70%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.01 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

  • Variable Home Loan 90

    • Principal and Interest
    • LVR <90%
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.06 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • Fixed Rate Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Fixed 3 years
    Comparison rate
    6.15 % p.a.
    Initial monthly repayment
    $3,027

    Additional repayments of up to $10K per fixed year. Interest rate discounts available. Waiver of $499 application fee when combined with an Orange Advantage Home Loan.

  • The Better Home Loan Special Offer

    • Owner Occupier
    • Principal & Interest
    • LVR<80%
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.59 % p.a.
    Fixed 3 years
    Comparison rate
    7.06 % p.a.
    Initial monthly repayment
    $3,190

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

image of houses

Need help with refinancing?

You might have questions that need personal answers. We’ve teamed up with the mortgage brokers at Lendi to get you the answers you need, and a home loan deal you deserve.

Learn more


^Mozo data, as of 6 July 2020.

^^Mozo calculations, as of 2 July 2020.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.